Fidelity Just Crowned Ethereum as Digital Money – And Traders Are Loving It

Wall Street's crypto embrace hits hyperdrive as Fidelity officially recognizes Ethereum's monetary value. The $7.8 trillion asset manager just gave ETH the ultimate institutional nod – and it's sending shockwaves through DeFi.

Why this matters now

While Bitcoin remains crypto's gold standard, Ethereum's smart contract dominance is forcing traditional finance to rethink what 'money' even means. Fidelity's move comes as ETH flirts with its 2025 highs – proving even boomer money can smell the gas fees.

The fine print

This isn't some crypto bro hot take. We're talking about one of the world's most conservative financial institutions putting ETH in the same conceptual bucket as fiat currencies. The same firm that still charges $50 trade commissions suddenly gets blockchain's value proposition? Must be a bull market.

What happens next

Expect more institutional dominoes to fall as regulated players chase yield in DeFi's candy shop. Just don't expect them to understand how any of it actually works – the suits still think 'gas' refers to their lunchtime burritos.

It’s a comprehensive effort by Fidelity, but it provokes some questions.

GDP is a measure of domestic production. Think “the value of everything made here.” When a country exports, that’s domestic production. When it imports, that’s spending. That’s why we “net” imports for GDP.

But if millions of stablecoins are bridged onto (import) or off of (export) Ethereum, that bloats a blockchain’s “GDP” even though nothing productive occurs onchain.

Contrast that to when a stablecoin is minted onchain, or when a Helium miner is paid in tokens for providing a useful mobile cellular service. These are productive “imports” that would rightfully count toward a blockchain’s “GDP.”

So measuring “net exports” by bridge flows is conceptually sound, but it needs to account for CEX cold-wallet sweeps, as Blockworks’ Dan Smith aptly pointed out.

Explicit in Fidelity’s valuation model is also the claim that L1 tokens should be valued on the basis of “money,” or more specifically: a medium of exchange and store of value.

Fidelity argues: “Ether is the dominant trading pair on exchanges and serves as a primary asset to borrow against.”

I think that at best justifies the “medium of exchange” aspect of money, but is silent on the “unit of account” aspect.

Early crypto investors have questioned the ability of L1 tokens to serve as a unit of account. As John Pfeffer wrote back in 2017:

“It is thus overly simplistic to assume that people will hoard that which they use to make payments as opposed to converting their store of value via the payment rail at the time of payment in the exact amount needed and for as little time as possible.”

Account abstraction (ERC-4337) even formalizes this reality, since it enables paying gas fees in any ERC-20 token. That vastly improves the user experience but it removes the need to hoard ETH, thereby undermining the “monetary premium” of the L1 token.

The final aspect of why I think the GDP analogy is somewhat strained looks to accounting for staked ETH under the “Investment” bucket of GDP.

Staking locks up existing assets, but no new productive capacity is created.

In economist jargon, it doesn’t push the “production possibilities frontier” in the same way investment does in the real economy.

So the “I” in blockchain GDP loses its predictive LINK to future growth.

Even worse: LP deposits can migrate and earn purely extractive airdrops or MEV.

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